Recession Signals Gone Rogue

Market Sizzle: Broken Signals, Cash Inflows, Streaming Deals, Faster Trades

Ever wondered if "unlimited leave" really means unlimited? Post-Memorial Day vibes might have you thinking: Is this perk just fool's gold? Let’s dive into the paradox!

Unlimited leave sounds great, but Americans still don't take more time off. Companies like Netflix and Microsoft offer it, but employees worry it looks bad to take too many days off.

Studies show taking enough leave boosts health and productivity, but without clear guidelines, unlimited leave might backfire. Bosses need to lead by example and ensure employees feel okay taking their deserved breaks.

Trading Chaos Incoming

The US has shortened the time to settle trades. This change, called T+1, means trades must be completed in one day instead of two. It covers stocks, bonds, ETFs, mutual funds, and options. Canada, Argentina, and Mexico also switched to T+1.

This change aims to reduce risk and prevent market chaos, like during the 2021 meme stock craze. SEC chair Gary Gensler said, “Time is money and time is risk.”

While this improves efficiency, it challenges global traders, especially those in different time zones. For example, Hong Kong traders will have less time to settle US deals. The financial world needs to adapt quickly to this faster cycle.

Broken Recession Signal

The inverted yield curve, a key recession signal, seems broken. This curve flips when short-term Treasury yields are higher than long-term ones. It's predicted the last eight US recessions. Yet now, despite being inverted for a record 400 days, there's no recession. The US added 175,000 jobs last month, and growth is expected to rise.

If no recession occurs, the yield curve may lose its predictive power. This anomaly challenges long-held beliefs on Wall Street. The curve reflects investor expectations of Federal Reserve rate cuts, often made to revive weak economies. Economist Campbell Harvey, who first highlighted the curve's significance, admits its limitations. Investors might now see this inverted curve as the new normal.

Cash Floods Back

Investors are putting money back into U.S. mutual and exchange-traded funds, with $172 billion in inflows this year. This reverses the outflows of the past two years. Money is moving from safe options like money-market funds to stocks and bonds.

“The economy is in good shape,” said Michael Arone from State Street Global Advisors. This optimism has driven the S&P 500 up 11% in 2024. Globally, ETFs have seen a record $468 billion in investments.

Even with inflation concerns, investors remain confident. They favor higher-risk investments, including corporate bonds and bitcoin-tracking funds. The Vanguard S&P 500 ETF leads with $37 billion in inflows.

Investors like Shane Archuleta are bullish, betting on long-term U.S. market growth. Fund managers also show the most optimism since 2021.

Streamers' Saving Spree

Good news: You can save money on streaming with special deals and bundles. Bad news: It’s getting harder to keep track of all the options. This month, Disney and Warner Bros. Discovery announced a discounted package of Disney+, Hulu, and Max. Comcast launched a $15 bundle for Netflix, Apple TV+, and Peacock for Xfinity customers.

Bundling helps streamers reduce customer losses, while users get discounts and simpler bills. But the many options can be confusing. Verizon and Walmart+ offer streaming deals too. Media companies are joining forces to create more bundles.

Not everyone wants bundles. Some prefer finding individual deals. Bundles help with customer retention, but Netflix has the lowest customer defections and may benefit less from bundles.

Before signing up, check if you already have access to services for free or at a discount through your subscriptions or credit cards.

Quick Sizzles:

• Saudi Arabia to Sell Aramco Shares: Saudi Arabia plans to sell $10-$20 billion in Aramco stock this week. This move aims to fund mega projects like the $500 billion Neom city, easing the pressure to raise funds.

• T-Mobile Buys U.S. Cellular Assets: T-Mobile agrees to buy most of U.S. Cellular's operations for $4.4 billion. This deal adds 4 million new customers and valuable spectrum rights, expanding T-Mobile's reach into rural areas.

• Shein Faces IPO Woes: Fast-fashion giant Shein's plans for a New York IPO stall due to U.S.-China tensions. The company now shifts its listing efforts to London amidst scrutiny from both nations.

• Chinese EV Makers Hit by Tariffs: New U.S. tariffs on Chinese electric vehicles pose challenges for premium market entrants like Zeekr. These companies must now strategize for European expansion to avoid intense price wars and new tariffs.

That’s today’s Market Sizzle; good trading, good life!